28/09/2022

Chapter 4: External analysis:

Micro focus - industry and sector analysis

DR NGUYEN THI QUYNH TRANG

FAC ULT Y O F T O UR I S M & HO S P I TAL I T Y, N E U

Strategic process

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Chapter objectives

Understand the role and focus of external analysis

Understand the role and focus of analysing the micro-environment
Describe the industry’s structure using Porter’s five forces framework and relate it
to tourism and hospitality business
Understand industry dynamics: industry life-cycle & comparative industry structure
analysis (radar plot)
Understand how to analyse the firm’s competitors

1. EXTERNAL ANALYSIS: MICRO-ENVIRONMENT

2. INDUSTRY STRUCTURE ANALYSIS: PORTER’S 5-FORCES

FRAMEWORK
Contents
3. INDUSTRY DYNAMICS: INDUSTRY LIFE-CYCLE &
COMPARATIVE INDUSTRY STRUCTURE ANALYSIS (RADAR
PLOT)

4. COMPETITORS AND MARKETS

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1. External analysis

Why external analysis?

 To respond effectively to changes in their environments, organizations must
understand the external and internal contexts
 Organizations do not exist in isolation but do depend on its larger
environment
Analysis of the external environment  identify opportunities and threats
 decrease the likelihood of major surprises and shorten the reaction time to
emerging events

EXTERNAL ENVIRONMENT

Micro-environment

Internal environment

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Analysing micro-environment

Focuses (content) of analysis: Industry, markets, and competitors

Roles:
- Critical success factors in industry and markets
- Needs and opportunities for competence building and leveraging
- The potential for collaboration with suppliers, distributors, customers
and competitors

2. Analysing industry and markets

Industry analysis
 Supply side of the economic system  example in tourism and
hospitality industry

 Aim to understand the nature of competition and the competitive position

of the organisation

 Porter’s five forces model

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Industry structure analysis: Porter’s 5 forces framework

Group discussion

Explain 5 forces
Take an example of each force from the tourism and hospitality
industry in Vietnam

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Force 1. Threat of potential entrants

Barriers:
The capital cost of entry
Brand loyalty and customers’ switching costs
Economies of scale and experience advantage
Access to input and distribution channels
The expected reaction of established businesses
Government policy

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Force 2. Bargaining power of suppliers

The uniqueness and scarcity of the resource that suppliers

provide
How many other industries have the requirements for the
resource?
Switching costs between suppliers
The number and size of the resource suppliers

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Force 3. The bargaining power of buyers

The number of customers and the volume of their purchases

The number of businesses supplying the product and their size
Switching costs and the availability of substitutes

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Force 4. The threat of substitutes

The extent to which the price and performance of the substitute

can match the industry’s product
The willingness of buyers to switch to the substitute

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Force 5. The intensity of rivalty among competitors

The relative size of competitors

The nature of costs in industry
The maturity of the markets served
The degree of brand loyalty of customers
The degree of differentiation
Government regulation
The height of exit barriers

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3. INDUSTRY DYNAMICS: COMPARATIVE INDUSTRY STRUCTURE ANALYSIS

(RADAR PLOT)

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Industry dynamics: INDUSTRY LIFE-CYCLE

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4. COMPETITITORS AND MARKETS

Strategic groups: similar competencies, same demands in the same market

segment, similar quality of products/services
Strategic group analysis (competitive group analysis): analyse the competitive
structure and position of the key competitors

Construct two-
Analyse the
Identify crucial dimensional
firm’s position in
competitive plots of the
relation to
dimensions competitive
competitors
dimensions

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Short case illustration:

Strategic group analysis: Wyndham hotel group
(page 292-293)

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MARKET SEGMENTS

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Industry and market critical success factors (CSFs)

CSFs: reputation of the brand, service excellence, product range/features,

distribution and innovation
Competence and core competence should directly address these CSFs
CSFs drive the selection of strategy direction and strategy implementation
Short case illustration: Canadian DMOs (page 296, 297)

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Summary of chapter 4
Role of the external analysis
Micro environment analysis
Porter’s five forces
Industry dynamics: radar plot and industry life cycle
Strategic group analysis

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